Typically, a product moves through each step of a supply chain to bring the product closer to an end consumer. Products usually move from a manufacturer to a warehouse, to a distributor, to a retail store, and finally to a consumer. Sometimes a product must move at least one step backwards in the supply chain for a number of reasons. In some cases, the product shipped to the store or purchased by the consumer is the wrong product, size, shape, color, type, and/or kind. Also, a consumer may not be satisfied with a product once it is purchased and wants to return it. Regardless of the reason, there are many occasions when products are returned to retailers, wholesalers, or manufacturers through reverse logistics. It is estimated that reverse logistics costs account for almost one percent of the total United States gross domestic product.
In addition to the above examples of products that are returned by consumers to the store from which they purchased the product, there are many products that reach the store, but are never displayed for a potential consumer's purchase. Moreover, some products are displayed in a store for potential purchase, but for a variety of reasons, the products are never sold, which is the final step of the supply chain. There are a plethora of reasons a product is sent backwards through the supply chain without having been purchased and then returned to the store and/or distributor. These reasons include without limitation the following: products that are defective, products nearing an expiration date, products that are damaged, products that are discontinued, surplus products, products on recall, and products delivered as part of a promotion. The process of moving products backward through the supply chain at least one step in the chain is commonly known as “reverse logistics”.
Generally, the goal of a reverse logistics process is to move these unsold or returned products through the supply chain in reverse order to recover residual product value. Typically, retailers can return products to suppliers for a small credit. Today, retailers are often forced to bear the cost and financial loss of products that cannot be sold to a secondary retailer and cannot be returned to the supplier for a small credit. Businesses utilizing reverse logistics processes are concerned about the frequency that the reverse logistics process must be used because of the high cost and attendant profit loss.
In today's marketplace, many retailers treat the return of products and reverse logistic processes as individual disjointed transactions. The challenge for retailers is to recover the greatest amount of value spent on unsalable products in a manner that provides quick, efficient, and cost-effective collection, reclamation, and resale.
Many retailers make use of a third-party reverse logistic company to assist with the reverse logistics process. Third-party reverse logistics providers see that up to seven percent (7%) of an enterprise's gross sales are captured by return costs. Third-party reverse logistics providers can realize between about twelve percent (12%) to about fifteen percent (15%) profit on its business.
While exemplary embodiments of the invention disclosed herein extend to a wide variety of retail applications, exemplary embodiments of the present invention is particularly well-suited but not limited to retail grocery stores. In the grocery environment, reverse logistics is typically not applied on a small scale, due to the relatively low cost of individual items. When a grocery product is damaged or discontinued, on recall, or approaching or past an expiration date, it is removed from the shelf and checked out of the store's inventory system, which begins the reverse logistics process.
Under the typical reverse logistics process, the unique identifiers or barcodes of products unfit for sale are scanned out of the store's inventory system and the products are sorted into a collection of unsalable products. Eventually, these unsalable products are placed into boxes or onto skids, which are shipped via truck to the nearest distribution center of the store. At the distribution center, similar shipments of unsalable products are received from multiple stores throughout the region, and consolidated onto pallets.
Next, the pallets of boxes of unsalable products are shipped to a reclamation center. The reclamation center does not know the identity of the unsalable products it is receiving because in the typical reclamation process, neither the retailer nor the distribution center tracks the identity of each product placed onto the pallet. Similarly, in the typical reclamation process, neither the retailer nor the distribution center tracks the condition of each unsalable product placed onto the pallet. The reclamation center processes consolidated shipments of unsalable products from various companies, including the store, and handles them appropriately. For instance, upon initial arrival at the reclamation center, unsalable products are examined. Leaking and otherwise heavily damaged products are disposed of by the reclamation center. The remaining unsalable products are sorted according to the disposition service requested by the product manufacturer. While some unsalable products may be returned to the product manufacturer for a small amount of credit, other unsalable products might be donated to charity services, disposed of at a loss to the store, destroyed if on recall, or be grouped with similar unsalable products (coffee products, for example) and then sold off by the pallet to secondary retailers.
Current methods use an ad-hoc approach to the reverse logistics processes. In other words, no standardized method exists for packaging, locating packages during the process, or shipping unsalable products. What is needed therefore is a method for retailers to standardize packaging, locating unsalable products, and shipping unsalable products all from the store, rather than shipping the unsalable products to one or more third parties.
Regardless of the specific form of disposition, reclamation centers typically charge retailers handling and storage fees for each item handled. Such fees typically range from about twenty-five cents to about thirty-five cents, depending upon the associated agreements. The fees vary according to the disposition path of the unsalable products, and a penalty fee is charged if an undamaged unsalable product is delivered to the reclamation center. Typically, a fee is assessed even if the unsalable products is ultimately destroyed or disposed of at the reclamation center. Much inefficiency exist in the typical reverse logistics procedure including loss of product value, theft, loss of product, inefficient boxing and packaging, and inefficiencies caused by several instances of shipping between retailers, warehouses, distribution centers, reclamation centers, and manufacturers.
Despite the substantial financial stake companies have in the current reverse logistics process, the processes suffer from a number of defects and inefficiencies that are addressed by the present invention. The first common inefficiency in contemporary reverse logistics processes is an inefficient use of resources. Many companies use reverse logistic methods which are not standardized and suffer from excessive costs associated with shipping, boxing, excessive product handling, and inventory management. Second, buyers of these pallets of unsalable products typically have no way of knowing the contents of the pallets with any level of precision. Third, many unsalable products are exempted from the current method of reselling items packaged in large pallets.
Current reverse logistics methods often severely limit the market of potential buyers of unsalable products, because the unsalable products are sold only in large pallets, which are only useful for large entities like discount stores and such, which have the means and demand for products in bulk. Accordingly, current reclamation methods are not able to be downsized in scale to the sale of a box to a single customer. What is therefore needed is a scalable reclamation method to sell directly to individuals and which may eliminate the use of third party reclamation companies.
Also, in current reverse logistics processes, many unsalable products are ineligible for reclamation by the original product manufacturers. While some product manufacturers do not participate at all, others opt for up-front negotiation of reclamation credit. Furthermore, some unsalable products are exempted from the reclamation process because they are hazardous, other products are exempted from the reclamation process because they are perishable, and some private label products effectively offer no return for unsalable products. What is therefore needed is a reverse logistics method that can easily categorize the various types of unsalable products to determine which ones are auctionable direct to the consumer from the retail establishment itself.
Current reverse logistics processes also make it extremely difficult, if not impossible, to record and access certain information in compliance with record keeping requirements of FDA regulations and other government requirements, such as The Bioterrorism Act. For example, if a store knowingly sells products to wholesalers or other businesses, then the store is required to maintain certain records including the name and address of the firm buying the products, telephone and fax numbers (as well as email addresses, if available) of the purchaser, type of food (including brand name and specific product name), date of sale, quantity and type of packaging (e.g., 12 oz. cans), immediate transporter to buyer, and lot codes from the manufacturer. Because existing reverse logistics processes are unable to record this information, stores are limited to selling to end users (consumers), donating unsalable products, or failing meet the government regulations. Therefore, what is needed is a reverse logistics method that can maintain and access suitable records to demonstrate compliance with such federal regulations.